Jackson Hewitt files for bankruptcy protection

Jackson Hewitt said Tuesday it filed for Chapter 11 bankruptcy protection under the weight of heavy debt.

The nation's second largest tax preparer said its lenders agreed to a restructuring plan to lower debt and interest expense. It filed the prepackaged plan with the U.S. Bankruptcy Court for the District of Delaware for court approval.

Under the plan, Jackson Hewitt's secured lenders will receive their pro rata share of a new $100 million term loan and all of the stock in the reorganized company. Shareholders and unsecured lenders won't receive anything.

Jackson Hewitt expects the plan to be implemented in 45 to 60 days. It will operate normally and prepare for the 2012 tax season until then. The Parsippany, N.J., company doesn't expect customers, franchisees or employees to be affected.

The company has yet to report how many tax returns it handled this season, an unusual omission from such a major tax preparer.

However, its chief rival, H&R Block, reported in April that its total tax returns grew by 6.1 percent, or 1.2 million during the 2011 tax season. Filings using its software and completed online rose nearly 15 percent through April 18 compared with last year. H&R Block, the largest tax preparer, also said that it is gaining market share in its retail and digital businesses.

Tax preparers were dealt a major blow this tax season when the Internal Revenue Service did away with a code it used to indicate to preparers that a taxpayer would receive his entire refund. That code acted as a sort of credit check for refund anticipation loans, or RALs, a key product popular with early-season, low-income filers seeking quick access to their refunds.

Without that IRS guarantee, funding for RALs dried up for many preparers, including H&R Block. However, Jackson Hewitt had about 80 percent of the RAL funding it had historically, up from 50 percent last year.

Last month, the company received a notice from the NYSE's regulatory body saying that the tax preparer was not in compliance with the exchange's listing standards. The average closing price of its stock fell below $1 for more than 30 straight days.

Shares of the company slid 57 percent, or 11 cents, to 9 cents on the over-the-counter Bulletin Board in afternoon trading.